What’s behind the Café Gratitude closure, what’s next?

Update, 01.26.12: We learn from Café Gratitude co-owner Terces Engelhart that the Berkeley restaurant on Shattuck may not close after all. “Wanting to let you know that we are planning on being able to keep Berkeley Café Gratitude open!,” she writes in a January 24th email. We will keep readers updated.

Original story: Last week’s unexpected announcement that all eight Northern California Café Gratitude restaurants — including the one in Berkeley’s Gourmet Ghetto — will close because of former employee legal action prompted a range of responses from readers and eaters from “I am Sad” to “I am Amused” to “I am Indifferent.”

The raw-and-cooked organic, vegan food chain, where every item on the menu is an affirmation that begins “I am…” prompted one wag on Twitter to comment that the naming convention in itself was actionable.

Citing “aggressive lawsuits,” owners Matthew and Terces Engelhart revealed the pending shuttering on Facebook and, later, on their website, a few days after Thanksgiving. “Although we believe that we have done nothing wrong and our policies are completely legal, it will cost us too much money to defend them in court,” read the Facebook message. The margins in the food business are notoriously slim and, the couple maintain, they simply don’t have the finances to fight a protracted legal battle.

Café Gratitude on Shattuck in the Gourmet Ghetto. Its closure will leave a gap in the restaurant district.

Café Gratitude has always had its devotees and its detractors. Some embrace the cafes’ concept, which celebrates abundance, espouses so-called sacred commerce, and encourages personal transformation. “It’s a magical place where you’ll have a completely different dining experience. Everyone is positive and happy,” said Berkeley’s manager Alice Liu in a Berkeleyside profile last year. “There’s a good vibe here. We believe you can be in business and treat your employees in a kind and caring way.”

Not everyone has warm and fuzzy feelings for the joint — and not just because of its New Age speak and cult-like following. There are currently two legal challenges. One lawsuit takes Café Gratitude to task for its allegedly illegal tip pooling practices. A second suit, filed by a former bookkeeper, is a claim for disputed unpaid overtime wages. No workers from the Berkeley location, which employs around 25, have filed suit to date.

An attorney for the plaintiff in the unpaid overtime dispute isn’t buying the pleading poverty defense from the Engelharts. “These are not huge cases. There’s no reason, financially, for them to close eight locations,” said attorney Stephen Sommers, to Chronicle‘s Inside Scoop, adding that the suit is unlikely to cost more than $200,000. “They are not closing these restaurants because of these lawsuits. There’s something else.” The lawyer didn’t speculate what exactly, but in the social media swirl following the announcement some suggested that the restaurants’ founders may not want to be subjected to discovery, where one’s dirty laundry might be exposed.

Owners Terces and Matthew Engelhart on their Be Love Farm in Vacaville.

But Terces Engelhart maintains it’s all about the money and that the speculation otherwise is based on “the incorrect information that it would only take $200,000 to settle these cases,” she told Berkeleyside. “The plaintiffs have said the cases are worth over $600,000. Defense costs could be over $200,000. If we lose, we would also have to pay plaintiffs’ attorney fees, which could be $400,000. We simply do not have resources sufficient to stay in business given these potential costs.”

Café Gratitude is no stranger to controversy. Last year the East Bay Express reported that a café employee was fired from a San Francisco location, in part for refusing to attend Landmark Education.

Regardless of how people feel about Café Gratitude’s philosophy (expansive self empowerment, mind-control cult, or something in between) many people who have actually eaten there appreciate the food. “I’ve enjoyed working with Café Gratitude as a stop on my Gourmet Ghetto culinary tour for the past three years,” said Lisa Rogovin, owner of Edible Excursions. “I’m not saying Café Gratitude is everyone’s cup of tea, but on the whole people like the experience. I’ll miss their smoothies and corn tortillas and masa for the tamales from their Vacaville farm. I’m sure it’s going to be a bummer for people with dietary restrictions who found they could eat everything on their menu.”

The Engelharts opened their first Café Gratitude in San Francisco’s Mission District in 2004; the Berkeley store followed soon after. Only the Los Angeles restaurant — popular with the celebrity set — will remain open, because it is under a separate ownership structure. A planned outpost in Kansas City (yes, you read that right), will also proceed under separate ownership, said Englehart.

The end of Café Gratitude leaves a gaping hole in the Gourmet Ghetto. “The association is sad to see Café Gratitude go. They have been an active and generous member of our business community,” said Heather Hensley, executive director of the North Shattuck Association. “Café Gratitude was also a great complement to our culinary scene, offering a unique menu and perspective on food. We hope another restaurant will fill the space soon.”

The prime Gourmet Ghetto spot makes it an attractive piece of real estate for another edible enterprise. “The Berkeley café had an offer on it earlier this week, which was rejected by the landlord,” Englehart told Berkeleyside, indicating that new offers are under consideration. Stay tuned.

Shangri-La Vegan in Oakland has much better food and no creepola Scientological vibe.

Anonymous

All of this really has nothing to do with CG’s hippy ambience. It’s much duller than that–its about whether tip pooling is a legal practice. Laws vary from state to state, but California’s are some of the strictest, which is probably why the suit was filed. Even here, it’s legal under many circumstances. It wasn’t that management was getting a percentage of the tips, which is perhaps the common tip pooling violation, but that back end kitchen employees were getting a cut. If the Engelhart’s claims of over $1 million of potential liability is accurate (including legal fees), it serves as very good reminder to small business owners to be fully aware of all the nuances of California’s labor laws.